How to start a handicraft - practical tips

Service Business

Handmade goods are unique as you cannot make two identical items. Handicraft is gaining more and more amateurs in Poland. Some are attracted by the uniqueness and originality of projects, others by contact with an artist or craftsman, the opportunity to participate in the creative process, and others by the desire to support local artists and domestic business. In turn, the creators, choosing handicrafts, focus on their own business. Read our article on how to start a handicraft!

Initially, handicraft may be an additional activity, a passion developed after work, but as interest grows, a hobby can successfully become a way of life. Currently, many artists live only thanks to the work of their hands. Undoubtedly, it is helped by the development of the Internet and portals dedicated to the sale of hand-made products. Thanks to this, it is possible not only to establish cooperation with other creators, but also to attract foreign customers. Enter markets that small entrepreneurs have never dreamed of reaching.

Handicraft - a hobby or a way to do business?

Crafts have always been present in our culture. In cultural anthropology, people often talk about folk handicrafts, which may be why it has been equated with flair for years. Slightly forgotten in the 1990s, today it is experiencing its renaissance again. At the same time, it should be remembered that handicraft is not a simple activity. Talent alone is not enough to be successful. What's more, the sale of your own products requires the fulfillment of a number of formalities.

If you intend to earn money from your work, you need to start a business. Otherwise, you may be exposed to penal and fiscal consequences. According to the law, economic activity is: gainful production, construction, trade, service activities as well as exploration, recognition and extraction of minerals from deposits, as well as professional activities carried out in an organized and continuous manner.

Regular sale of own products certainly meets the definition. The form of sale is irrelevant - stationary or via the Internet. The obligation to register a business applies to all authors who sell their works. Setting up a business is not the end of a craftsman's duties. There are still taxes to be paid. In accordance with the changes introduced from April 30, 2018, it is possible to run a business without having to register it, the so-called unregistered activity. This form of running a business can only be used by people who earn no more than 50% of the minimum wage for each month (in 2021 this amount is PLN 1,400 respectively) and who have not run their own business for the last 60 months. More about unregistered activity in the article: Unregistered activity - what is it and what does the act say about it?

Social Security contributions

If the craftsman is employed full-time by another employer and receives at least the minimum national salary (in 2021 it is PLN 2,800 gross), then he must additionally pay only the health insurance contribution in ZUS. If he does not receive the minimum wage, he must pay all full ZUS contributions for his business. The same is the case with an entrepreneur for whom hand made is to be the only source of income.

In order to register with the Social Insurance Institution, the craftsman should submit the form within 7 days from the date of commencement of business activity:

  • ZUS ZUA - if it is to be fully insured (running a business is the only title to insurance),
  • ZUS ZZA - if it is to be subject only to compulsory health insurance (if the craftsman works full-time, where the remuneration is not lower than the minimum).

The above forms are submitted in order to register a person for insurance.

In addition, a craftsman starting a business may take advantage of preferential ZUS contributions. It should be emphasized that the reduced contributions are voluntary and valid for a full 24 months. The decision to pay lower premiums must be made by the creator immediately, when first applying for ZUS insurance (ZUS ZUA or ZUS ZZA).

In addition, natural persons undertaking business activity for the first time or again after at least 60 months from the date of suspension or termination, may take advantage of the so-called discounts to start. Entrepreneurs who meet the above requirements will then not be subject to compulsory social insurance for a period of 6 months from the date of commencement of economic activity. After two years, a craftsman using preferential contributions will be obliged to pay full ZUS contributions, i.e. over PLN 1,000. monthly. The transition from the so-called small ZUS to large is not automatic, it is associated with the completion of formalities in the Social Insurance Institution. The taxpayer is responsible for completing the formalities.

Income tax

The decision to start a craft-related business also has income tax implications. The craftsman must decide which form of taxation to use.

If he decides to settle on general principles according to the tax scale, he will keep a book of revenues and expenses. If he is employed by another employer, he must notify him of the fact of setting up his own business, due to the tax-reducing amount. In such a situation, after receiving a PIT 11 from the employer, the craftsman shows in his annual PIT 36 return both the salary from the full-time job and from the business activity he conducts.

Profits from the conducted activity will be shown on the basis of the KPiR. It is worth noting that a person setting up a business immediately declares the periods in which he will pay the PIT tax return. There are two options to choose from: monthly and quarterly. In practice, this means that the craftsman will be obliged to make advance payments on PIT by the 20th day of the month following each selected settlement period. The selection is made in the CEIDG-1 application form.

In taxation under general rules, there are two applicable tax rates: 17% and 32%. When settling on general principles, it is possible to deduct the tax-free amount, use of tax reliefs and joint settlement with the spouse. The general rules are favorable for people whose annual income does not exceed PLN 85,528 and for those who have a family. When the amount of PLN 85,528 is exceeded during the year, the excess of revenues above the indicated value is taxed at the rate of 32%.

With regard to the form of taxation, the craftsman may also decide that he wants to settle according to the rope tax (19%) or lump sum, and not according to general rules. In such a situation, be cautious if you are employed by another employer. Being on a lump sum or flat tax, the craftsman may not, for the first year of activity, cooperate with the current or former employer as part of activities coinciding with the conducted economic activity. If this form of taxation is chosen, it is not possible to take advantage of most tax reliefs and make settlements with the spouse on PIT -37.

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With regard to the recorded lump sum, it should be noted that it is a specific form of taxation, in the case of which the income tax is calculated only on the amount of the income earned, which means that tax costs are not taken into account at all. The lump sum rates, however, are relatively low - 2%, 3%, 5.5%, 8.5%, 10%, 12.5%, 15% and 17%, their amount depends on the type of business activity performed.

The last possible form of taxation is the tax card. In the case of this form of taxation, the value of the tax paid is constant and does not refer to the revenues earned. Taxation in the form of a tax card is possible in relation to entrepreneurs who conduct activities specified in art. 23 sec. 1 of the Lump-sum Income Tax Act. Entrepreneurs engaged in the activity of folk and artistic production, consisting in the production of products only in a handicraft manner, with the use of machine processing only for the preliminary processing of the raw material, may take advantage of taxation in the form of a tax card. The condition is that these products have been qualified by the ethnographic and artistic committees of the Folk Artists' Association, the "Cepelia" Foundation - Polish Art and Craft, and the Foundation for the Protection and Development of Folk Art.

Active or exempt taxpayer?

As a rule, running a business involves taxing the sales made with VAT. The entrepreneur may, however, take advantage of the subjective exemption from VAT. This exemption is possible if the turnover in a given tax year does not exceed PLN 200,000, and the type of goods sold is not statutorily excluded from the exemption.

The taxpayer using the exemption must keep an eye on the limit. In the event that it is exceeded (or by choice), it will be necessary to register for VAT on the VAT - R form, part C1, item 33.

Being an active VAT taxpayer is beneficial when the taxpayer makes significant purchases, then he has the option to deduct input VAT. If the economic activity is established during the year, the limit of 200 00 thousand. PLN is calculated proportionally in relation to the period in which the activity is conducted.

Facilitations in managing a handmade company

As mentioned earlier, all craftsmen who plan to earn a living only from handmade work are obliged to set up a business and pay ZUS contributions (at the beginning there is a possibility of using preferential contributions, while later the artist is obliged to pay full ZUS ). Only the aforementioned fees will generate a considerable cost for the craftsman, and you should also remember about the costs associated with running a business, i.e. settling accounts with the tax office, and managing the sale of your products.

Independent bookkeeping

In order to minimize the costs associated with running a business, a craftsman can run the company's own accounting. The wFirma.pl system is an intuitive and easy-to-use program for this type of activity. Thanks to the solutions included in this model, it is possible, among others:

  • quick invoicing in as many as 7 language versions, which is necessary when the artist sells his goods to foreign markets

  • keeping your own schedule, indicating all important meetings, shipment of goods, as well as dates related to the payment of ZUS, taxes, etc.

  • generating employment contracts, orders and specific specific contracts, which greatly facilitates the work of an entrepreneur in the situation of employment of an employee or establishing cooperation with subcontractors

Management system and legal aspects

What's more, thanks to the wFirma.pl system, the craftsman does not have to worry about legal changes that could have a significant impact on his company. The management system automatically loads and implements all changes and updates the available functions.

An additional improvement in work is also the security provided by the system, because all data is stored in professional server rooms that meet the highest security standards, and personal data is protected in accordance with the standards adopted in the Personal Data Protection Act.

Cash register - is it necessary?

In the case of sale to natural persons who do not run a business, or to flat-rate farmers, it is necessary to record the sale for them at the cash register. There is a possibility of exemption from the cash register if the turnover limit of 20,000 is not exceeded. PLN (annually), and the type of products is not listed in the catalog of goods that should absolutely be stamped on the cash register. If the business is established during the year, the limit amount must be calculated proportionally to the period of operation.
It should be remembered that, despite the exemption, if there is a sale of goods excluded from the personal exemption, the sale transaction must be recorded at the cash register. In the case of purchasing a cash register, the entrepreneur may additionally take advantage of a discount for its purchase.
In the event of exemption from the cash register, the taxpayer documents the sale in the register of non-accounting sales.

How to start a handicraft - popular forms of sale

Today, craftsmen have many opportunities to sell their works. The shopping portals: Pakamera.pl and Etsy.com are very fashionable. The creator can create a profile of his store on them. He does not have to bear the costs of creating a website for an online store, website positioning and optimization himself. It can reach a larger audience and also establish business cooperation with other creators. When deciding to cooperate with a large portal, remember that they charge commission on sales.

If the craftsman is not interested in selling their work on a large online platform, they can create their own website with an online store option. The advantage of this solution is the unlimited influence on the content and appearance of the website. The downside is the need to constantly optimize the website and promote the website.

Nowadays, presence in social media is a necessity, especially for developing businesses. Sales generated by social media have continued to grow in recent years. It is worth creating a company profile and combining it with a sales option. Social media is also a great tool to show our company behind the scenes and to meet customer expectations. Another form of running a business may be establishing or joining a work cooperative. These are voluntary associations that run a business in the interest of their members (at least 10). Supporters of traditional forms of sale can establish cooperation with shops offering handicrafts. If they have more capital, they may even think about starting their own store. The best solution, however, will be to use several forms of sale - operating on several fronts at the same time. It is also a good idea to get involved in initiatives such as fairs, fairs, workshops.

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Handicraftsmen admit that the biggest problem for them is the high costs of running a business. Hand made, however, is becoming more and more popular among customers. Moreover, consumers are becoming more and more aware and prefer to buy more expensive but proven goods instead of a mass-produced item.

In the case of handicrafts, you can find out exactly what the goods are made of and how. It is often possible to order an individual project, thanks to which the client is involved in the entire creative process. The growing popularity of handicraft portals shows that hand made can be not only a hobby, but also a way of life. An entrepreneur who wants to conduct independent settlements of his company can use a cheap solution, which is independent online accounting in the wfirma.pl system.

Handicraft and GDPR

A future entrepreneur engaged in handicraft - in situations where he processes personal data, under the GDPR Regulation, he is obliged in particular to:

  1. ensuring an appropriate level of security for the processing of personal data, in accordance with the principles set out in the GDPR Regulation, i.e., for example, to ensure that data are not disclosed to unauthorized persons,
  2. performing obligations arising from the rights of persons to whom personal data relate,

It is worth mentioning here that not every handicraftsman processes personal data. People who create products and display them on store shelves are not able to process personal data. Thus, the GDPR does not apply in such situations.

However, if the products are displayed in online stores - then personal data is already processed, therefore in such cases you should follow the GDPR.

Handicraft and marketing

A newly opened business, including a handicraft company, should not forget how important it is to promote your own services or ready-made products. The best place to take your first steps in marketing your business is on the Internet. In order to reach the widest possible audience, it is necessary to ensure that the company's offer is visible on many portals. Currently, various pages are available to search for company services. One of such websites is Taelo.pl, which allows entrepreneurs to set up a company business card and run a company blog for free.

Social media are also a good place to promote handicrafts. Facebook and Instagram are the best solutions in this context. Facebook - because in addition to the content - product descriptions or materials used, it can also generate space to present the entire range of the company. On the other hand, Instagram responds to the preferences of those recipients who are strong visual learners and buy the product only for aesthetic reasons.

As the company grows, it is also worth considering setting up a professional website, which will be undisputedly the most reliable source of information about the business and will allow you to reach a wider audience.